IR35 Autumn Statement Blow for Contractors
There was a fresh IR35 Autumn Statement blow for contractors. That is especially for contractors working in the public sector.
According to Samantha Hurley of The Association of Professional Staffing Companies (APSCo):-
“The Government has announced that it is to introduce IR35 tax changes, which will result in Personal Service Company contractors in the public sector losing their right to determine their tax status.
“We are furious that the Government has ignored all industry stakeholders and has overridden the concerns of its own departments.
“This change will give recruitment firms and other engagers, who pay the contractor, liability and responsibility for operating payroll and paying the correct taxes to HMRC.”
This will mean that the UK will go form having one of the most flexible freelance labour markets in the world to having one of the most inflexible.
The Government are saying that this is to make sure that those contractors in the Public Sector pay the correct tax.
Most contractors work through recruitment agencies. This pushes the responsibility of deciding a contractor’s status onto them.
Why would they want to potentially incur massive fines if a contractor has the worng tax status?
They’re sure to play it safe and force the contractor to pay the IR35 tax.
Forced to Pay IR35 Tax
This will mean that many contractors who are not inside IR35 will have to pay it.
Said Samanatha, “This is a disappointing and illogical move. The public sector will inevitably see its costs rise at a time when budgets are already very tight.
“A survey of independent professionals undertaken in July this year by IPSE, a membership body for independent professionals and the self-employed, revealed that 39% of respondents would work on public sector contracts but would increase their day rate to compensate for the extra tax liability.
Contractors Would Terminate Contracts
“The same survey showed that over 50% of respondents would refuse to work on public sector contracts – or would terminate contracts if required to pay tax and NICs as an employee when delivering services independently.
“We already see a severe impact on the public sector’s access to talent. There have been walkouts from a Ministry of Defence Agency which has left several major IT projects on hold.”
Online IR35 Test
It seems that HMRC have a new online tool where you can check your status as regards IR35.
However, HMRC have a bad history in this respect.
They had another online tool which they developed with contractors group IPSE which was to show whether contractors were caught by IR35.
The points system was so strict almost every contractor was inside IR35.
No Legal Status
It had no legal status whatsover. The courts should decide sort of thing and not an online HMRC quiz. They are not exactly neutral observers.
If the online tool says that a contractor is caught by IR35 then the agencies will make them pay out. Most public sector contractors will be forced to pay IR35 tax.
However, that may not be the end of the matter as contractors and their represenatives may not agree with this assessment and may challenge it legally.
Of pourse, making all public sector contractors take the online tax and then pay IR35 may be just the start. This IR35 Autumn statement blow may be just the start.
This could be the testing ground for all UK contractors.